General Overview
Freight rates are generally up – Continuing global port congestion reduced vessel capacity by an estimated 2,51 million twenty-foot containers. As a result, freight rates rose by around 4%.
SA trade surplus increase – The South African Revenue Service (‘SARS’) reported a preliminary R20.5 billion monthly trade surplus for May 2024. The Year-To-Date trade surplus of R45,2 billion was a considerable improvement above the R18,2 billion trade surplus noted in 2023.
E-commerce is driving growth – Figures show that the digital economy is expanding at a rapid pace, there has been a noteworthy increase in e-commerce, which reached $27 trillion in 2022 (up around 60% from 2016).
Fewer ships through Suez – As the month ended, global sources reported that “any further escalation of the Red Sea crisis would have a limited impact on the container markets as only 14% of the ships currently deployed on the Asia- Europe trade are using the Suez Canal”.
Vessels are re-routing around the Cape, resulting in longer sailing times and increased costs. However, the prognosis for 2024 is still favourable, but industrial policies and geopolitical concerns will continue to shift the outlook of international commerce.
Global Shipping
Capacity down – The vessel diversions from the Red Sea to the Cape route have effectively removed more than 1,6 million 40-foot containers from the market since the beginning of December.
Fleet growth – In June, the delivery of 51 new container ships pushed the global container ship fleet across the 30 million Twenty Foot Equivalent Unit Container (‘TEU’) milestone for the first time.
Sailing times get longer – The month saw longer passage times for cargo ships rerouting via the Cape of Good Hope leading to delivery schedule delays and higher fuel expenses. This caused havoc with shipping costs, warehouse operations, inventory management, and ultimately consumer satisfaction along supply chains.
Capacity woes – By mid-July, global port congestion resulted in the equivalent of 2,22 million TEU of capacity being taken out of the system, accounting for 7.4% of the total fleet. Shanghai, Singapore, and Jebel Ali had the most volumes waiting outside at anchorage.
The last week of July saw spot rates drop since April, raising hopes that container freight rates may finally be decreasing.
International Air
Volumes up – The month began with a slight reduction in the average daily week-on-week air cargo handled at OR Tambo International Airport (‘ORTIA’). Despite this, industry volume was 6% up in June 2023.
Global air freight tonnages rose by around 12% in the first half of 2024 compared to the same time in 2023.
A steady 11% growth in Q2 followed a 12% increase in Q1.
Container shipping disruptions and cross-border e-commerce are driving air freight volumes up. The World Air Cargo Market Data (‘ACD Market Data’) from January to May 2024 indicated that global chargeable weight increased by 12% year on year, with general cargo rising by 13% and special cargo by 10%.
In mid-July, the international air cargo market had shown gains of around 15,5%, with notable gains recorded on the Africa-Asia route, which saw an increase of approximately 40,6%.
South Africa fuel production – The International Air Transport Association (‘IATA’) announced that South Africa has the capacity to lead the way in the manufacture of sustainable Aviation Fuel, which would help the aviation industry reach its 2050 net zero carbon target.
Online shopping leads to growth – The e-commerce boom is contributing to volume increases. By the end of July, the industry was up on pre-pandemic levels, increasing by 5% vs July 2019.
The first half of 2024 saw remarkable performance in air cargo growth from Central Asia, the Gulf Area, and several Asia Pacific subregions, according to World ACD’s half-year report.
Asia is the region with the biggest growth in outbound air cargo, with the Gulf Area (up 31%) and Central Asia (up 36%) seeing the highest year-over-year growth.
Port Operations
Weather and breakdowns – The month began with port operations in Durban and Cape Town being constrained by adverse weather, equipment breakdowns, shortages and congestion. Cape Town and the Eastern Cape experienced high winds and swells, while Durban faced congestion and equipment challenges.
Transnet National Ports Authorities (‘TNPA’) issued a Request for Information (‘RFI’) for Mossel Bay loading facility refurbishment.
Overall, rail cargo handled out of Durban appears to be steady with average week-on-week volumes ranging from 2700 containers to just over 3 000 containers per week.
Local and Cross-Border
Border crossing times at South African borders fluctuated, as did those of the greater Southern African
Development Community (‘SADC’) region.
Change for transporters – Customs Beitbridge imposed penalties of R20,000 on bonded import entries where clearing agents used their consignor bond instead of the licensed removers’ bond.
In future, according to Customs Beitbridge’s interpretation of Section 64D(a), all licensed removers of goods in bond in South Africa, or registered agents, must provide security as determined by the Commissioner.
So now all southbound shipments are mandated to have adequate surety lodged with the South African Revenue Service (‘SARS’) to cover duties and VAT for each shipment, causing notable frustration among transport operators.
Rail link upgrade – Trafigura, and partners, ordered 275 container wagons from South Africa for a railway from the Democratic Republic of Congo (‘DRC’) copper mines to Angola’s Lobito port. This $500 million investment is planned to upgrade the railway line to offset China’s regional influence.
Paperwork snags – The month saw major disruptions in westbound traffic at the Plumtree frontier border crossing between Botswana and Zimbabwe.
The main cause of the impasse is the Zimbabwe Revenue Authority (‘ZIMRA’) and transporters’ restrictions on tax clearance.
Some carriers were unable to provide the ITF263 Tax Clearance certificate and without this paperwork, transporters are unable to cross the border, creating a long line in the neutral buffer zone separating the two nations.
Challenge for Congo’s transporters – There was some confusion when it was announced that transporters operating a vehicle within Lubumbashi are required to carry additional documentation.
The Federation of East and Southern African Road Transport Association (‘FESARTA’) have verified that vehicles registered in the Congo are the only ones subject to these regulations.
FERI Certificates for DRC cargo – However, cargo imported into the DRC or transhipped through the DRC still requires a Fiche Electronique des Renseignements a L’ Importation (‘FERI’) Certificate.
Turners Shipping is an authorized agent to make an application for FERI Certificates on behalf of importers and exporters to the DRC. For ease of application visit https://turnersshipping.co.za/feri-certificate-services/
General Overview Summary
The recent increase in throughput volume has been positively received as recovery plans are showing results.
The logistics industry needs collective efforts to enhance cargo movement and support trade flows. Significant investments in ports and railways, including equipment and infrastructure, are urgently required.
The approval of the Environmental Impact Assessment (‘EIA’) for constructing a second access road to the Port of Durban has been widely welcomed, and the project needs to be expedited.
Efficient cargo transport operations depend on connecting access roads with major provincial and national roads.
Effective connections are vital for driving trade and economic growth, which are crucial for South Africa’s development.
The recent political developments in South Africa, including the cabinet reshuffle, are expected to impact the trade, transport, and logistics industry.
Barbara Creecy has been appointed Minister of Transport, with Mkhuleko Hlengwa as Deputy Minister, emphasizing the Department of Transport’s role in managing key state-owned entities like Transnet.
The industry has generally welcomed these appointments.
Additionally, Parks Tau is the new Minister of Trade, Industry, and Competition, with deputies Zuko Godlimpi and Andrew Whitfield, reflecting a focus on economic growth and a business-friendly environment.
The disbandment of the Department of Public Enterprises, with oversight transitioning to the Presidency, aims to streamline governance but may present short-term challenges during the implementation of a new shareholder model.
These changes seek to improve efficiency and performance in entities like Transnet, but careful management by the new Government of National Unity (‘GNU’) is crucial during this critical period for the logistics network.